JELD-WEN Holding, Inc. (NYSE: JELD) is a leading global designer, manufacturer, and distributor of high-performance interior and exterior doors, windows, and related building products, serving the new construction and repair and remodel (R&R) sectors. The company has a long and storied history, tracing its roots back to the 1960s as a general wood-making company. Over the years, JELD-WEN has evolved into a vertically integrated global manufacturer, with manufacturing and distribution facilities in 15 countries across North America and Europe.

Financials

In the fiscal year 2023, JELD-WEN reported annual net income of $46.7 million, annual revenue of $4.30 billion, annual operating cash flow of $348.8 million, and annual free cash flow of $237.9 million. The company's performance has been impacted by the challenging macroeconomic environment, with softening demand in both its North America and Europe segments.

For the first quarter of 2024, JELD-WEN reported net revenues of $959.1 million, down 11.2% from the prior-year period. This decrease was driven by a 12% decline in core revenues, which excludes the impact of foreign exchange, divestitures, and acquisitions. The company's gross margin for the quarter was 18.0%, compared to 17.7% in the prior-year period, as improved productivity helped offset the impact of lower volumes.

Selling, general, and administrative (SG&A) expenses increased to $182.8 million, or 19.1% of net revenues, in the first quarter of 2024, compared to $152.8 million, or 14.1% of net revenues, in the prior-year period. This increase was primarily due to accelerated amortization of an ERP system that the company is no longer utilizing, as well as increased professional fees related to strategic transformation initiatives.

Restructuring and asset-related charges increased to $18.1 million in the first quarter of 2024, compared to $9.3 million in the prior-year period. These charges were primarily related to the closure of two manufacturing facilities in the company's North America segment as part of its ongoing efforts to streamline and simplify its manufacturing footprint.

The company's North America segment generated $680.0 million in net revenues in the first quarter of 2024, a decrease of 11.5% from the prior-year period. This decline was driven by a 12% decrease in core revenues due to lower volume mix. The Europe segment reported net revenues of $279.1 million, a decrease of 10.7% from the prior-year period, also driven by a 12% decline in core revenues due to lower volume mix.

JELD-WEN's adjusted EBITDA from continuing operations was $68.7 million in the first quarter of 2024, compared to $79.3 million in the prior-year period. The decrease was primarily due to the lower volume mix in both the North America and Europe segments, partially offset by improved productivity and higher other income.

Outlook

Looking ahead, JELD-WEN has updated its full-year 2024 guidance. The company now expects revenue to be in the range of $3.9 billion to $4.1 billion, down from its previous guidance of $4.0 billion to $4.3 billion. This revised outlook is primarily driven by continued high interest rates, leading to increasing project delays in both North America and Europe, a slower seasonal demand ramp-up in the second quarter, especially in the company's North America retail business, and the impact of the company's ongoing portfolio pruning initiatives.

The company has also lowered its adjusted EBITDA guidance for 2024 to a range of $340 million to $380 million, down from its previous guidance of $370 million to $420 million. This revised EBITDA guidance reflects the impact of the lower expected revenue at a 25% to 30% decremental rate.

Recent Developments

Despite the near-term challenges, JELD-WEN remains focused on its transformation journey, which is centered on strengthening the foundation of the business and pursuing profitable organic growth opportunities. The company continues to make progress on its cost reduction initiatives, with a target of $100 million in cost savings for 2024, a combination of carryforward benefits from 2023 and new initiatives.

One example of the company's growth initiatives is its Windows Stock and Service Program, which leverages the company's strengths in various parts of its windows business to address the needs of the growing single-family home construction market. While the revenue and EBITDA projections for this program remain modest in the near term, JELD-WEN sees significant potential to expand it as it continues to focus on providing value to its customers.

The company has also made the difficult decision to exit its Auraline Composite Window business, as it was not achieving the desired business plan objectives. This decision is part of JELD-WEN's ongoing review of its product portfolio to identify opportunities to improve the quality of its sales and focus on areas where it can achieve acceptable profitability levels.

In addition to these strategic initiatives, JELD-WEN is also investing in its people and culture, with a focus on training and aligning its senior leaders around the company's vision and goals. The company believes these investments in its people and operational improvements will position it for success as the market environment improves.

Conclusion

Despite the near-term headwinds, JELD-WEN remains confident in the long-term fundamentals of the North American and European housing markets. The company's commitment to transparency and its willingness to make tough decisions to improve the quality of its business are encouraging signs that it is taking the necessary steps to navigate the current challenges and position itself for future growth.

Overall, JELD-WEN's performance in the first quarter of 2024 reflects the impact of the challenging macroeconomic environment, but the company's focus on its transformation journey and its willingness to make strategic decisions to improve the quality of its business are positive indicators for its long-term prospects. Investors will want to closely monitor the company's progress in executing on its cost savings initiatives and its ability to capitalize on growth opportunities as the market environment evolves.